Facebook: Ad Pricing Supports Q2 Expectations, Says Evercore

By Tiernan Ray

Evercore Partners‘s Ken Sena today reiterated an Overweight rating on shares of Facebook (FB), and a $75 price target, writing that advertising software provider Nanigans has disclosed that “cost-per-click” for ads on Facebook rose 29% in the second quarter, which he considers a good sign.

While some might think that is a disappointment versus 39% growth in prices in Q1, writes Sena, actually it’s possible Facebook will show enough growth in volume of ad traffic that it will make up the difference:

If we apply the 29% CPC growth on last quarter’s reported users, we get to $1.82 ad ARPU for 2Q vs. EVR / Street of ~$2.04 (presumes flat user growth). While this would suggest a miss on the basis of pricing, it does not account for click volume growth. In other words, based on the Nanigans benchmark study we would need to see a 12% improvement in y/y click volume to meet Ad ARPU expectation, which could be made up of clicks-per-user, user growth, or a combination.

Sena thinks the data “points to an achievable bar this quarter based on past trends.”

Sena’s modeling $2.78 billion in revenue in Q2 and a 35-cent profit per share, a little better than the Street’s average estimate of $2.8 billion and 32 cents.

About Tech Trader Daily

Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.